When deciding whether or not to file for bankruptcy, one must first consider a number of factors. Bankruptcy, in general, offers several significant benefits for those sinking in debt. However, it comes with a big price, especially where credit standing and the ability to be approved for future loans is concerned.
This matter is particularly troubling for student loan borrowers, as many borrowers have difficulty getting their loans discharged after they decide to file. Borrowers are often required to continue re-payment, which can feel like taking 10 steps back after seeking financial relief through the bankruptcy process.
The Student Loan Exception
While there is some truth to the myth that student loans can be difficult to discharge in bankruptcy, the reality is it can and has been done before. Therefore, every student loan borrower should be aware of a few facts when addressing their existing loans during the bankruptcy process.
The discharge process takes time. Even when you request that your student loan be discharged, it is important to know beforehand that discharge approval takes time. It is not an automatic process that happens overnight. You will be required to prove in court that the repayment of your student loans will cause you financial hardship, and that can require some time-consuming footwork.
You must prove undue hardship. In order to discharge your student loan, the Department of Education requires you to prove to the court that you and your dependents would be placed under serious financial strain if you were forced to continue repayment. You must meet at least one of the following criteria:
You would be unable to maintain a minimal standard of living;
You have made loan payments faithfully prior to bankruptcy, preferably for a minimum of five years; or
You can furnish proof that your financial strain will continue for a significant portion of the remaining repayment term.
You need to work with a professional. There are additional factors considered when the court determines whether or not a student loan debt will be discharged. This can include everything from changes in the debtor’s health since the time the loan was incurred, whether the debtor was deemed unemployable by the Department of Veterans Affairs, or if the debtor filed for bankruptcy due to circumstances beyond their control.
Speak with a Skilled Tax Law Lawyer Today
Due to the nature of the undue hardship process, you need to work with a knowledgeable Cook County tax law attorney who can offer you a competent consultation and can advise you on what steps to take next to avoid serious consequences. Call the Law Offices of Eric G. Zelazny today at 708-888-2299 for a personal consultation.